• The Wall Street Journal, Monday, September 21, 2009 10:07 PM

WPP CEO Martin Sorrell believes that during this recession his company misread the economic tea leaves. "We were too optimistic," he says. WPP saw its profit for the first half of 2009 plunge by almost 50%. Now some would say he is overly pessimistic. "The recession is L-shaped, which implies that it will never go back to where it was before. The forecast for levels of increase in traditional and nontraditional ad spending is anemic for the next two or three years. Free-to-air television, [print] newspapers and magazines will never be the same again," he says.

Sorrell expects to see a recovery first in China and India. "In India, they are arguing whether it will be 6% or 7% growth, and [in the U.S.] we would give our eye teeth to be flat."

WPP's plans for further cost-cutting focus on "adjustments to our investment in people, which others argue we should have done earlier." The number of people in the company was down by about 7% by the end of July, compared with Dec. 31, 2008. It continues to fall at a rate of about 1,000 a month. "That will flatten out as we come through the end of the year and into next year," he says.

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